India appoints Princeton-educated Malhotra to lead central bank

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Dec. 9 — India appointed Sanjay Malhotra, a career bureaucrat, as the new governor of the nation’s central bank, ending weeks of speculation over who would helm monetary policy in the world’s fastest-growing major economy.

The new governor will take charge of the Reserve Bank of India for a three-year term from Dec. 11, according to a government statement Monday. He succeeds Shaktikanta Das who has been the RBI chief since 2018.

Malhotra, currently serving as revenue secretary in the Ministry of Finance, has more than three decades of experience in public policy, with expertise in areas such as power, finance and taxation. Previously, he also served on the RBI board as representative of the financial services department.

The new governor takes charge at a time when the central bank is in a tough spot. There is rising pressure on the RBI to cut interest rates as growth slowed down to a seven-quarter low of 5.4% in the July-September period.

There have been growing calls from within the Narendra Modi government for the RBI to ease. Finance Minister Nirmala Sitharaman and Trade Minister Piyush Goyal both recently said that high borrowing costs are hurting the economy.

Last week, Das in his last policy, kept the benchmark rate unchanged, and took steps to boost liquidity in the banking system, potentially aiding an already slowing economy. Volatility in food costs, which make up about half of the inflation basket, will likely keep price gains elevated in the October to December period, Das had said.

India’s inflation has remained well above the RBI’s target aim, with price gains accelerating to a 14-month high of 6.21% in October. The central bank has a government-mandated inflation target of 4%, plus or minus two percentage points.

The surprise appointment won’t drastically alter the course of India’s monetary policy, analysts said. Most economists in a Bloomberg survey expect the central bank to cut rates starting early next year.

“If growth continues to underwhelm, then obviously chances of interest rate cut increases, but a February rate cut still depends on data,” said Gaurav Kapur, an economist with IndusInd Bank Ltd.

Malhotra is a graduate from the Indian Institute of Technology, Kanpur, and has a Master’s in Public Policy from the Princeton University.

He is believed to have good relations with the finance minister, allowing for better coordination of monetary and fiscal policy. His implementation of the new income tax regime is seen as a key achievement in his tenure in the ministry.

“The RBI has a history of bureaucrats becoming the governor,” said Anubhuti Sahay, an economist with Standard Chartered Bank Plc. “Irrespective of the governor in place, we believe India is on the round of turning point where rate cuts will have to begin.”

While Malhotra has refrained from making comments on the monetary policy, he has pitched for boosting investments by simplifying the tax regime. Recently, he urged revenue officials to prioritize economic growth and exercise caution while issuing high-pitched demand notices to businesses amid ongoing tax disputes with major companies, including Infosys Ltd.